HomeRegistered Alternative Investment Funds (RAIF) in Cyprus
Looking for a quick and convenient way to create an investment fund without a complex licensing procedure? Registered Alternative Investment Funds are the optimal solution! RAIF have become an important part of Cyprus’s investment system, offering a flexible and cost-effective tool for investors seeking to leverage opportunities across various asset classes.
This type of structure, along with a favourable tax regime, allows investors to attract more capital, and high-income individuals to gain financial benefits from an alternative investment method. Our legal company will help select and set up an RAIF structure in accordance with European standards, ensure reliable management, and compliance with CySEC requirements.
What are registered alternative investment funds?
Registered Alternative Investment Funds, RAIF, is a unique and flexible collective investment structure that was created to simplify the fund creation process. This provides investors and management companies with the opportunity to enter the market more quickly while maintaining a high level of regulatory oversight.
RAIF offers extensive opportunities for investing in various assets: real estate, shares, bonds, venture projects, infrastructure projects, and even cryptocurrencies. Managers can apply individual strategies depending on investors’ goals and market conditions.
Key characteristics of RAIF
RAIF does not require direct licensing from CySEC. Instead, its management is transferred to a licensed management company, which bears full responsibility for compliance with the established requirements.
RAIF is registered in the special CySEC register, which speeds up the process of launching the fund. Registration is quick because CySEC only reviews the management company, not the fund itself.
RAIF offers unique flexibility in choosing the legal form, which makes them attractive for a wide variety of investment strategies and categories of investors. Possible structures: Limited Liability Company, Limited Partnership, Common Fund, as well as an Umbrella Fund, which combines several sub-funds with different investment strategies and asset classes. Each sub-fund retains legal independence, which reduces risks between them.
Advantages of creating RAIF in Cyprus
Firstly, RAIF does not require obtaining a separate licence from the Cyprus Securities and Exchange Commission. Instead, it is registered in the CySEC register, and management is carried out by a licensed management company (AIFM). The exclusion of the licensing stage reduces administrative burden, allowing for a quicker market entry.
RAIF provides a unique opportunity to adapt the fund structure to the needs of investors and the specifics of assets. Funds can invest in a wide range of assets: real estate, shares, bonds, startups, infrastructure projects, and even cryptocurrencies.
Cyprus offers a favourable tax regime that enhances the competitiveness of RAIF: no capital gains tax, dividends, no double taxation, which minimises tax liabilities in cross-border transactions.
RAIF are oriented towards professional and qualified investors, providing them with unique advantages: access to high-yield assets, including startups, private equity, and infrastructure, as well as flexibility in management and a high level of protection.
RAIF in Cyprus offers the opportunity for international expansion thanks to its status as an EU member and its reputation in the financial services sector. Management companies can use the European “passport” to promote the fund in the markets of other EU countries.
Steps for registering RAIF in Cyprus
The first step is to determine the appropriate legal form and structure of the RAIF depending on the investment objectives, asset class, and target audience of investors.
- A Limited Liability Company (LLC) is the most popular form for RAIF. Suitable for funds with an umbrella structure;
- A limited liability partnership is the ideal option for venture funds and private equity funds;
- Trust (Common Fund) — used for family asset management or closed investment strategies.
Then it is necessary to choose a licensed management company with experience in the relevant investment sector, as well as to agree on the responsibilities between RAIF and AIFM (asset management, compliance, risk management, interaction with regulators), prepare a contract and specify all its functions of responsibility in it.
To register a RAIF, it is necessary to prepare a complete set of documents that reflect the structure of the fund, the investment strategy, and the management procedure:
- Memorandum of issuance;
- Description of the investment strategy, target assets, risks, expenses, and income;
- Charter of the fund;
- Partnership agreement for RAIF in the form of a Limited Partnership.
- Policies and procedures: AML/KYC, risk management, corporate governance;
RAIF does not require obtaining a licence but must be registered in the special register of CySEC. For this, a package of documents must be submitted to the regulatory authority: founding documents, Offering Memorandum, agreement with the management company, data on the auditors and administrators of the fund.
CySEC checks the compliance of RAIF with legislative requirements, including the qualification of the management company and the completeness of documentation. After successful verification, RAIF is entered into the CySEC register, which allows it to commence operations.
RAIF is obliged to cooperate with a number of professional providers who ensure its management and compliance with regulatory requirements. The fund administrator is responsible for managing operational activities, processing investor applications, and calculating the net asset value (NAV). The auditor ensures the annual audit of financial statements. The depositary carries out the safekeeping of the fund’s assets and ensures the protection of investors’ interests.
After the registration of RAIF and the appointment of all necessary specialists, preparation for the launch of the fund is carried out. The main actions: opening bank accounts for the fund’s operations, developing marketing materials in accordance with requirements, organising an information system to ensure transparency and interaction with investors.
RAIF is obliged to comply with all legislative requirements and regularly submit reports to CySEC: annual submission of audited financial statements, analysis and disclosure of fund risks, implementation and constant updating of anti-money laundering and client identification policies.
Compliance with regulatory requirements and supervision
AIFM are required to fully comply with the provisions of the European Directive on Alternative Investment Fund Managers, including risk management, information disclosure, AML/KYC compliance, and reporting preparation. The management company assumes the functions of developing and implementing investment strategies, monitoring risks, and interacting with regulators.
CySEC conducts regular inspections of licensed AIFM to ensure their ability to manage RAIF in accordance with legal regulations.
RAIF is obliged to ensure constant monitoring and control of all types of risks:
- Identification and assessment of risks: market, credit, operational, liquidity;
- Diversification of assets: to minimise dependence on a single asset class or market;
- Conducting stress tests: regular scenario simulations to assess the fund’s resilience to market fluctuations.
Anti-Money Laundering (AML) and Know Your Customer (KYC) systems are mandatory for all RAIF. Funds are required to collect information about beneficial owners and the sources of their funds, monitor suspicious transactions, and promptly notify CySEC of violations, as well as regularly update client data to avoid outdated information and improve the accuracy of procedures.
The role of the Cyprus Securities and Exchange Commission (CySEC)
The Cyprus Securities and Exchange Commission, CySEC, is a regulatory authority ensuring compliance with financial regulation standards in Cyprus. CySEC supports Cyprus’s integration into the European financial market, making it attractive to international investors.
The main tasks of CySEC:
- Implementation of EU directives into national legislation;
- Ensuring transparency, investor protection, and compliance with corporate governance standards;
- Conducting inspections of the activities of financial organisations to identify and prevent violations.
Management companies are required to provide CySEC with activity reports, including data on asset structure, risks, and financial indicators. CySEC analyses these reports to ensure their accuracy and full compliance with regulatory requirements.
CySEC conducts scheduled and unscheduled inspections of AIFM activities to ensure compliance with management standards, disclosure requirements, and anti-money laundering measures. In case of violations, CySEC has the right to impose sanctions, including fines, temporary suspension of the licence, or its revocation.
Obligations for providing current reporting
The purpose of the current reporting is to disclose complete and reliable information about the financial and operational activities of companies, monitor financial stability, and assess the efficiency of asset management.
Companies under the supervision of CySEC are required to submit a number of regular reports:
- Annual financial statements: data on income, expenses, assets, and liabilities to demonstrate financial stability and transparency. They must be prepared in accordance with International Financial Reporting Standards (IFRS);
- Interim reports: unaudited quarterly or semi-annual reports for monitoring the current financial situation;
- Risk reporting: reflecting market, credit, operational, and liquidity risks used to assess the company’s resilience in various market scenarios;
- AML/KYC reporting: information on client verification, identification of suspicious transactions, and measures to prevent crimes to protect the financial system from illegal activities;
- Operational reporting: information on any changes in the composition of the Board of Directors, key personnel, or internal structure to maintain up-to-date information about the company.
Companies are required to publish up-to-date information about their activities, including investment strategies, risks, asset structure, and fees.
Annual financial statements must be submitted within 4 months after the end of the financial year. Quarterly and semi-annual reports: submitted within 1–2 months after the end of the respective period. Immediate notifications of significant corporate changes must be submitted within 5 working days.
The submission of reports is carried out through the online platform CySEC, which simplifies the process and allows the regulator to process data promptly.
Our services for the creation and management of RAIF
Our international law firm offers a full range of services aimed at the creation, management, and support of RAIF in Cyprus. We will provide legal, administrative, and tax support to ensure your fund complies with all requirements, develops successfully, and generates profit for investors.
Comprehensive legal support
The creation of a RAIF requires strict compliance with Cypriot legislation, European directives, and stringent regulatory standards of CySEC. We offer:
- Assistance in the creation and structuring of RAIF: analysis of your business goals and selection of the optimal fund structure, preparation of founding documents, consulting on the choice of RAIF type;
- Consulting on the selection of a management company: searching for a licensed manager with experience in your segment, analysing the qualifications of AIFM to ensure compliance with CySEC requirements;
- Support with registration in CySEC: collection of all necessary documents and assistance with their submission, acceleration of the registration process thanks to our experience and knowledge of local legislation.
Assistance in fund administration and compliance with legal requirements
RAIF requires constant compliance with regulatory requirements and effective administration. We provide:
- Support in fund administration: appointment of a professional administrator to manage operational activities, organisation of a risk management and internal control system, maintenance of documentation, registration data and reporting;
- Ensuring compliance with legislative requirements: development and implementation of internal policies on risk management, AML/KYC and compliance, preparation of periodic reporting, support during audits and inspections by CySEC;
- Legal protection: constant monitoring of changes in the regulatory environment, updating internal documentation in accordance with new requirements.
Individual tax consultations
Tax optimisation is a key element of successful investment fund management. We provide:
- Tax planning consultations: analysis of possible tax benefits and advantages of RAIF in Cyprus, optimisation of the fund structure to minimise tax expenses;
- International tax compliance: consulting on matters of double taxation treaties (DTT), analysis of the fund’s tax obligations in other jurisdictions during international activities;
- Preparation of tax reporting: drafting and submission of the fund’s tax returns, verification of compliance with all requirements of Cypriot and international tax legislation.
The creation and management of a RAIF is a complex process requiring high qualifications and deep knowledge. Our team of experts is ready to take on all aspects of working with your fund, so you can focus on achieving your investment goals. Contact us right now for an initial consultation and the development of an effective strategy for establishing your RAIF in Cyprus! We will offer a personalised approach and guarantee the successful completion of all stages of the project.
